I have heard a lot of investors & accountants talk about Capital Gains, but I rarely hear about how the recapture of depreciation is calculated when a rental property is sold.
Is it accurate that we have to pay 25% of the recapture of depreciation “in addition to” the Capital Gains? See example below:
Purchase Price: $200k
Closing Costs on purchase: $10k
Sales Price: $400k
Closing Costs on sale: $20k
Recapture of Depreciation: $90k (over 17 years owned)
Upgrades/Improvements: $100k
So are the total **taxes due: $42,000…**Capital Gains: $400k - $200k - $10k - $20k - $100k = $130k x 15% = $19,500? plus
Recapture of Depreciation: $90k (over 15 years owned) x 25% = $22,500?